EXHIBIT I - Office of West Virginia Attorney General · Released: March 2014 17 NERA Assumptions on the Costs of Energy Efficiency in Electricity A recent academic study reviewed

EXHIBIT I

A Carbon Dioxide Standard for Existing Power Plants: Impacts of the NRDC Proposal Prepared for the American Coalition for Clean Coal Electricity

Released: March 2014

1 Released: March 2014

Context and Purpose

EPA intends to regulate CO2 emissions from existing power plants under CAA Section 111(d)

NRDC’s 2012 proposal for a Section 111(d) standard has received much attention – NRDC’s proposal provides for emission rate averaging among generators

(which allows a form of emissions trading and thus cost savings) and use of offsite credits, in return for a more stringent target emission rate than likely would be achieved under source-specific emission standards

– NRDC’s cost analysis is limited in scope and the study does not include some policy-relevant impacts

NERA analyzes the NRDC proposal – Uses updated information and improved assumptions – Considers a wide range of costs and policy-relevant impacts

NERA’s study evaluates impacts on the macro economy and energy markets that NRDC did not account for in its analysis


Contents

Executive Summary of NERA Results

NRDC’s Proposal

NERA Methodology to Analyze the Proposal – Baseline and CO2 target rate cases

– Comparison to NRDC assumptions

NERA Modeling Results in Detail

About NewERA Electricity Model

Appendix: Annual Impacts


Executive Summary

NERA used a state-of-the-art energy/economy model (NewERA) to assess the impacts of the NRDC proposal

– Updated information on costs for energy efficiency

– More consistent economic logic on adoption of energy efficiency in the baseline and policy case

Analyzed impacts of the NRDC CO2 target rate in two cases: (1) maximum compliance flexibility (even more than NRDC); and (2) limited compliance flexibility

Flexibility Trading Energy Efficiency/ New Renewables

Notes

1 Maximum National Credits Closest to NRDC proposal, but with national rather than regional trading

2 Limited Intra-State No Credits


Key Findings of NERA’s Analysis

Consumers would face more substantial costs from the policy than NRDC’s analysis suggests

Consumer costs would include costs to non-electric consumers of natural gas that were omitted from NRDC’s analysis

Overall policy costs are substantial and would increase significantly if the proposed emission limit is adopted but the degree of compliance flexibility in the NRDC proposal does not materialize

The inter-state trading envisioned in the NRDC proposal would create “debtors” and “creditors” among states (which may lower the chance of achieving the proposed compliance flexibility)


Energy Consumers Would Bear Large Costs under the NRDC Proposal

Maximum Flexibility Limited Flexibility Costs of Electricity Services (***) $109 billion $97 billion Costs of Natural Gas (not for electricity) $8 billion $54 billion Total Consumer Costs for Energy $116 billion $151 billion

Present Values of Estimated Consumer Costs (2018-2033)(*)

On an annualized basis, total consumer costs for energy would be between $13 and $17 billion per year for 2018 through 2033

(*) Stated in 2012$, discounted to 2013, incremental to the baseline. Totals may not equal sum of rows due to rounding. (**) Average over 2018-2033 relative to baseline. Job equivalents equal total labor income change divided by average income per job. Independent rounding of annual and cumulative job losses. These totals are change in net jobs, which includes increases in some sectors (e.g., energy efficiency) and decreases in others (e.g., coal). (***) This is the only cost calculated by NRDC, as they did not calculate any other cost impacts on the rest of the economy. This cost includes the total cost of energy efficiency, including the portion spent directly by consumers.

Maximum Flexibility Limited Flexibility

Annual average loss <1000 178,000

Cumulative loss (job-years) 5,000 2,850,000

Estimated Decline in Job Equivalents (2018-2033)(**)


Energy Markets Would be Affected in Major Ways by the NRDC Proposal

The impacts to consumers are derived from an analysis of how the CO2 standard would affect energy markets

Annual Average, 2018-2033

Total Coal Retirements

Through 2033 (GW)

Coal-Fired Generation

(TWh)

Natural Gas-Fired

Generation (TWh)

Henry Hub Natural Gas

Price (2012$/ MMBtu)

Delivered Electricity

Price (2012¢/kWh)

Ele CO2

Emissions (MMMT)

Maximum FlexibilityBaseline 41 1,742 1,093 $4.08 11.8 2,081NRDC CO2 Standard 76 1,451 1,183 $4.17 12.9 1,836Change 35 (291) 90 $0.09 1.0 (245)% Change +86.5% -16.7% +8.2% +2.2% +8.6% -11.8%

Limited FlexibilityBaseline 41 1,742 1,093 $4.08 11.8 2,081NRDC CO2 Standard 124 995 1,764 $4.74 12.2 1,597Change 83 (747) 671 $0.65 0.4 (484)% Change +205.4% -42.9% +61.4% +16.0% +3.4% -23.3%

Note: Independent rounding of scenario values and changes.


Electricity Prices Would Increase Substantially in Most States under the NRDC Proposal

In the Limited Flexibility case, electricity prices reflect the costs of fuel switching as well as net costs from intra-state trading and capital spending

In the Maximum Flexibility case, electricity prices reflect the costs of fuel switching, plus: – Cost impacts from energy efficiency and new renewable credit transactions and capital spending

– Net purchases/credits from inter-state trading ($24 billion is transferred from states that need to buy credits to states that can sell credits over 2018-2033, in present value)


Change in 2018-2033 Average Delivered Electricity Price (Relative to Baseline)

NRDC Proposal


NRDC Proposal

Study available at: http://www.nrdc.org/air/pollution-standards/files/pollution-standards-report.pdf

Regional CO2 target emissions rates with averaging allowed within regions

Fuel-specific CO2 target rates (lbs/MWh):

State composite target rate based on 2008-2010 share of coal vs. natural gas/oil generation

Credits for energy efficiency (demand) Credits for generation from post-2013

new renewables Heat rate improvement retrofits for coal

units

2016 2020 2025 Coal 1,800 1,500 1,200 Natural Gas/ Oil 1,035 1,000 1,000


NRDC Proposal Includes Four Sources of Flexibility/Cost Savings

1. Emission rate averaging for regions – Outputs focus on five regions (ISO-NE, NYISO, MISO, PJM, and

Southeast)

2. Electricity energy efficiency (demand side) credits – Assumptions based on study by Synapse Energy Economics

3. New renewable credits – Incremental renewable generation

4. Banking of emission reduction credits

NERA evaluates three sources of flexibility—national versus intra-state averaging as well as credits for both added electricity efficiency and new renewables


NRDC Forecasts Total Energy Efficiency Credits Far Beyond Historical Results

NRDC assumes that every U.S. region would “ramp up” from its current level of energy efficiency to 2% incremental annual energy savings in 2020

However, Vermont is the only state to achieve incremental savings of 2% from energy efficiency programs between 2006 and 2010; most states achieved less than 1%

Source: ACEEE, 2008 – 2012 State Energy Efficiency Scorecards Source: NRDC (2012), Table III.3, Table II.4; NERA calculations

NERA allows for NRDC-potential additional electricity savings by region but does not presume they would occur


NRDC’s Energy Efficiency Credits Include Some “Baseline” Savings

NRDC allows future energy efficiency savings already required by “on-the-books” state programs and mandates to contribute to emissions credits in its policy scenario

Source: NRDC (2012) Table II.4; EPA (2011) Projected Energy Impacts of Existing State EE/RE Policies

NERA reduces potential credits available in NRDC’s assumptions by subtracting out “on-the-books” programs/mandates (as estimated by EPA)


NRDC Includes Added Demand Response Programs Without Any Rationale for Why They Would Occur

NRDC assumes demand response programs (which are designed to reduce peak electricity demand) would increase in the policy case

NRDC does not explain why its proposed policy would lead to more demand response programs—such programs do not necessarily lead to CO2 emission reductions (and thus eligibility for credits)

It is not possible to determine from the information NRDC has provided about its analysis method whether the inclusion of additional peak demand reduction in its policy case has resulted in overstatement or understatement of its estimate of the policy’s costs

NERA does not include increases in demand response programs as there is no clear rationale for their increasing as a result of the NRDC policy


NRDC Assumes Energy Efficiency Credits are Cheaper than Electricity Prices All of NRDC’s energy efficiency credits are assumed by NRDC

to cost less than the delivered price of electricity (in all regions) – NRDC assumes energy efficiency credits start at 4.9¢/kWh in 2012

and rise only to 7.3¢/kWh by 2041 (in 2012¢)

– In contrast, average delivered residential electricity prices in July 2013 ranged from 8.9¢/kWh (Washington state) to 36.6¢/kWh (Hawaii)

NRDC does not explain why at least some (if not all) of these energy efficiency gains would not be adopted without the credit program (and thus be part of the baseline)

NERA modified NRDC’s electricity efficiency cost assumptions based on a recent academic study of the literature; also, NERA allowed cost-effective electricity efficiency to be chosen in the baseline case

NERA Methodology


Overview of NERA Methodology

Developed updated energy efficiency costs based upon a recent academic study that reviewed the cost literature

Developed corrected/modified baseline energy efficiency—accounted for “on-the-books” savings and allowed cost-effective energy efficiency to be used even without the CO2 target rate limit

Evaluated the NRDC CO2 target rate limit based upon two cases: 1. “Maximum Flexibility” with national emission rate averaging and credits

for energy efficiency and new renewables

2. “Limited Flexibility” with intra-state emission rate averaging and no credits allowed for energy efficiency and new renewables

Used up-to-date NewERA model (AEO 2013) to estimate the impacts of the NRDC CO2 target rate limit

We analyze effects of the NRDC CO2 rate limit for two cases allowing different amounts of compliance flexibility


NERA Assumptions on the Costs of Energy Efficiency in Electricity

A recent academic study reviewed the cost literature and provided conclusions regarding the likely costs of demand-side energy efficiency programs in electricity

NERA used these costs to estimate electricity efficiency in the baseline and in the NRDC CO2 target rate cases:

NERA uses a recent academic study that reviewed the literature to determine the cost of electricity efficiency

Model Year NERA Price of EE (2012 ¢/kWh)

2018 11.2 2023 12.6 2028 12.6 2033 14.3 2038 14.3 2043 16.7

Source: Based on values in Allcott and Greenstone (2012), p. 16 and assumptions regarding increases over time in NRDC (2012), p. 37 and Synapse (2011), p. 51.


NERA Assumptions Regarding the Baseline and the NRDC CO2 Target Rates

Baseline includes CAIR and MATS, state RPS, and other environmental regulations as well as any energy efficiency that is “on-the-books” or found by the model to be cost-effective in the face of future electricity prices

NERA evaluated the impact of NRDC’s CO2 target rate under two cases, Maximum Flexibility and Limited Flexibility:

Flexibility Trading Energy Efficiency/ New Renewables

Notes

1 Maximum National Credits Closest to NRDC proposal, but with national rather than regional trading

2 Limited Intra-State No Credits


NERA Modeling of NRDC CO2 Target Rates with National Trading and Credits

2018 2023 2028 Coal 1,800 1,500 1,200

Natural Gas 1,035 1,000 1,000

Target Rate 1,499 1,303 1,121

*/ Energy efficiency and new renewables are included in “Applicable Generation” only in the Maximum Flexibility case; the Limited Flexibility case does not allow credits for those actions to count towards meeting the target rate.


NERA’s Cases Bracket NRDC’s in Terms of Flexibility and Use Updated Assumptions on Energy Efficiency

NRDC Main Case NERA Maximum Flexibility Case

NERA Limited Flexibility Case

Flex

ibili

ty Emission

Rate Averaging

Regional

National

State

Credits Allowed

Energy Efficiency/New Renewables

Energy Efficiency/New Renewables

None

Assu

mpt

ions

Energy Efficiency Price

Synapse assumptions, always economical

Based on Allcott & Greenstone (2012)

Based on Allcott & Greenstone (2012)

Baseline Energy Efficiency

AEO 2011 assumptions AEO 2013 assumptions + “on-the-books” + any cost-effective energy efficiency

AEO 2013 assumptions + “on-the-books” + any cost-effective energy efficiency

Energy Efficiency Use

Synapse (2011) assumptions

Adopted when cost-effective up to NRDC total

(less “on-the-books” energy efficiency)

Adopted when cost-effective up to NRDC total

(less “on-the-books” energy efficiency)

Demand Response

Near-term Synapse (2011) assumptions

No demand response No demand response


Energy Market Assumptions in NRDC and NERA Cases

NRDC NERA

Electricity Demand AEO 2011 Reference Case AEO 2013 Reference Case

Peak Electricity Demand

AEO 2011 Reference Case EPA 2011 MATS analysis and AEO 2013 Reference Case

Reserve Margins NERC 2012 Summer Short Term Reliability Assessment

EPA 2011 MATS analysis

Natural Gas Prices Based on supply curves developed in 2011, regional differentials, and NRDC demand levels

Based on elasticity of demand, regional differentials, and NERA economy-wide demand levels

Coal Prices Model output based on NRDC demand levels

Model output based on NERA demand levels

NERA used AEO’s most recent energy market forecasts

NERA Modeling Results


National Financial Impacts on Generators and Consumers

Maximum Flexibility Limited Flexibility Coal -$93 million -$239 million Gas and Oil -$2 million $269 million Other Technologies -$9 million $30 million Total for All Generators -$103 million $60 million

Present Value of Changes in Revenues (2018-2033, 2012$) Impacts to Generators

Maximum Flexibility Limited Flexibility Coal -$25 million -$58 million Gas and Oil -$10 million $5 million Other Technologies -$5 million $29 million Total for All Generators -$40 million -$24 million

Present Value of Changes in Net Revenues (2018-2033, 2012$)

Costs to Consumers

Maximum Flexibility Limited Flexibility Costs of Electricity Services(*) $109 billion $97 billion Costs of Natural Gas (not for electricity) $8 billion $54 billion Total Consumer Costs for Energy $116 billion $151 billion

Present Value (2018-2033, 2012$)

As with many regulatory policies: (1) There could be winners and losers within the regulated sector while (2) Consumers as a whole absorb net costs

(*) This is the only cost calculated by NRDC, as they did not calculate any other cost impacts on the rest of the economy. This cost includes the total cost of energy efficiency, including the portion spent directly by consumers.


National Labor Impacts by Year, in Job-Equivalents

Results indicate lower average labor impacts if the CO2 target rate is implemented with provision for energy efficiency credits, as in the Maximum Flexibility case

Labor impacts may be much larger if the CO2 target rate is implemented without provision for energy efficiency credits, as in the Limited Flexibility case

Thousands of Job-Equivalents

2018 2023 2028 20332018-2033

Average2018-2033

CumulativeMaximum Flexibility

BAU 146,498 153,403 161,198 168,201 154,606 2,473,697NRDC CO2 Standard 146,368 153,329 161,341 168,505 154,606 2,473,693Change (131) (75) 144 304 (0)* (5)

Limited FlexibilityBAU 146,498 153,403 161,198 168,201 154,606 2,473,697NRDC CO2 Standard 146,435 153,190 160,931 168,069 154,428 2,470,846Change (64) (214) (266) (133) (178) (2,852)

Note: Job equivalents equal total labor income divided by average income per job. Cumulative job-equivalents represents job-years.*Fewer than 1,000


Labor Impacts by Region, in Job-Equivalents


2018-2033 Labor Impacts (Job-Equivalents, Relative to Baseline)

Definitions of Regions Modeled

NewERA Region

Annual Average Job-Equivalents

Cumulative Job-Years

CALI 1,000 23,000

NYNE 6,000 90,000

MACC (3,000) (48,000)

UPMW (8,000) (136,000)

SEST (4,000) (64,000)

FLST 6,000 89,000

MSVL (15,000) (248,000)

MAPP (9,000) (148,000)

TXOL 22,000 351,000

AZMT (<1,000) (4,000)

PNWS 6,000 88,000

US (<1,000) (5,000)

NewERA Region

Annual Average Job-Equivalents

Cumulative Job-years

CALI (5,000) (81,000)

NYNE (9,000) (142,000)

MACC (14,000) (217,000)

UPMW (43,000) (692,000)

SEST (23,000) (372,000)

FLST (3,000) (52,000)

MSVL (57,000) (907,000)

MAPP (16,000) (260,000)

TXOL 4,000 66,000

AZMT (9,000) (136,000)

PNWS (4,000) (59,000)

US (178,000) (2,852,000)


National Energy Efficiency Adopted

In NewERA, incremental energy efficiency is purchased to replace generation whenever it is cost-effective (including in the Baseline, which NRDC does not allow)

There is a large increase in energy efficiency relative to the Baseline in the Maximum Flexibility case, which additionally allows credits for energy efficiency

Source: NRDC (2012) Table II.4; EPA (2011) Projected Energy Impacts of Existing State EE/RE Policies


National Electricity Market Impacts

Annual Averages, 2018-2033

NRDC’s CO2 target rate would lead to large impacts on the electricity market under Maximum Flexibility and substantially greater impacts under Limited Flexibility

Total Coal Retirements

Through 2033 (GW)

Coal-Fired Generation

(TWh)

Natural Gas-Fired

Generation (TWh)

Henry Hub Natural Gas

Price (2012$/ MMBtu)

Delivered Electricity

Price (2012¢/kWh)

Ele CO2

Emissions (MMMT)

Maximum FlexibilityBaseline 41 1,742 1,093 $4.08 11.8 2,081NRDC CO2 Standard 76 1,451 1,183 $4.17 12.9 1,836Change 35 (291) 90 $0.09 1.0 (245)% Change +86.5% -16.7% +8.2% +2.2% +8.6% -11.8%

Limited FlexibilityBaseline 41 1,742 1,093 $4.08 11.8 2,081NRDC CO2 Standard 124 995 1,764 $4.74 12.2 1,597Change 83 (747) 671 $0.65 0.4 (484)% Change +205.4% -42.9% +61.4% +16.0% +3.4% -23.3%

Note: Independent rounding of scenario values and changes.


National Electricity Sector CO2 Emissions

The 2033 percentage reductions in U.S. electricity sector CO2 emissions would be 20% in the Maximum Flexibility case and 30% in the Limited Flexibility case (relative to the Baseline)

After the standard is fully phased in (2028), CO2 emissions would begin to rise as electricity demand increases over time


National Average Delivered Electricity Prices (All Sectors)

Energy efficiency does not reduce transmission and distribution costs, so retail rates/kWh rise as efficiency increases, because T&D costs are spread over fewer kWh

Costs for energy efficiency paid by distribution utilities are passed to consumers through retail rates, also resulting in higher rate impacts in the Maximum Flexibility case.

National average delivered electricity prices in 2033 would be 2.4 ¢/kWh higher than Baseline in the Maximum Flexibility case

Results will vary state to state


National Delivered Prices and Total Electricity Bills by Ratepayer Class

Utility energy efficiency costs would be passed to residential and commercial consumers through higher retail electricity prices, and rates per kWh for transmission & distribution would also increase as kWhs decrease

– Thus, NRDC’s CO2 target rate would lead to larger residential and commercial electricity price increases in the Maximum Flexibility case, which assumes energy efficiency credits, than in the Limited Flexibility case

Industrial rates are more affected by changes in gas prices, and thus industrial rate increases are higher in the Limited Flexibility case, which has a larger effect on gas demand and hence on gas prices than the Maximum Flexibility case

Delivered Electricity Price 2018 - 2033 Avg

(2012¢/kWh)

Total Annual Electricity Bills 2018 - 2033 Avg(billion 2012$)

Annual Generation2018 - 2033 Avg

(TWh)Res Com Ind All Sectors Res Com Ind All Sectors

Maximum FlexibilityBaseline 14.4 12.5 7.8 11.8 $203.0 $168.3 $86.0 $457.3 4,188NRDC CO2 Standard 16.0 13.9 8.0 12.9 $209.1 $173.0 $88.4 $470.5 3,988Change 1.6 1.5 0.2 1.0 $6.1 $4.7 $2.4 $13.2 (200)% Change +11.4% +11.7% +2.3% +8.6% +3.0% +2.8% +2.8% +2.9% -4.8%

Limited FlexibilityBaseline 14.4 12.5 7.8 11.8 $203.0 $168.3 $86.0 $457.3 4,188NRDC CO2 Standard 14.8 12.9 8.2 12.2 $206.1 $171.6 $89.2 $466.9 4,115Change 0.4 0.4 0.4 0.4 $3.1 $3.3 $3.3 $9.6 (73)% Change +3.0% +3.4% +4.6% +3.4% +1.5% +1.9% +3.8% +2.1% -1.7%

Note: Res = residential consumers, Com = commercial consumers, Ind = industrial consumers.


National Coal Unit Retirements

NRDC’s CO2 target rate would lead to substantial incremental coal retirements

Coal retirements would be much greater without national averaging or offsite credits

The additional coal retirements (above Baseline) would increase from 35 GW under the Maximum Flexibility case to 83 GW in the Limited Flexibility case

Most retirements would occur by 2023 in all cases


National Coal-Fired Generation

NRDC’s CO2 target rate would lead to large reductions in coal-fired generation

Reductions in coal-fired generation would be much greater without national averaging or offsite credits

Coal-fired generation in 2028 would decrease by about 26% in the Maximum Flexibility case and 64% in the Limited Flexibility case


National Coal Consumption

The decrease in coal-fired generation from NRDC’s target rate would lead to large reductions in coal use

Reductions in coal use would similarly be much greater without national averaging or offsite credits

Coal use in 2028 would decrease by about 30% in the Maximum Flexibility case and 77% in the Limited Flexibility case


National Natural Gas-Fired Generation

NRDC’s CO2 target rate would lead to increases in natural gas-fired generation

Natural gas increases would be much greater in the case without national averaging or offsite credits

The increase in 2033 gas-fired generation would be 85 TWh (7%) under the Maximum Flexibility case and 1,075 TWh (84%) in the Limited Flexibility case


National Natural Gas Consumption For Electric Power Generation

The increase in natural gas-fired generation under NRDC’s CO2 target rate would lead to increases in natural gas consumption for electricity

Natural gas increases would be much greater in the case without national averaging or offsite credits

The increase in 2033 electricity sector natural gas use would be about 0.6 Tcf (7%) under the Maximum Flexibility case and about 7.4 Tcf (81%) in the Limited Flexibility case


Henry Hub Natural Gas Price

The NewERA model calculated natural gas price responses to fuel-shifting under NRDC’s CO2 target rate

NRDC’s CO2 target rate would lead to natural gas prices increase in the Limited Flexibility case as generation shifts to natural gas (a rise of about $0.97 or 19% in 2033)

Natural gas prices would not change significantly in the Maximum Flexibility case, since offsite credits and credit trading reduce the need for fuel switching


Comparisons to Results Provided by NRDC (Changes from Baseline)

Comparison of NRDC and NERA Results (Relative to Respective Baseline)

Notes: NewERA model year 2023 was used for comparisons with NRDC year 2020. (In NewERA every 5th year is modeled and the limits in 2023 are most similar to those in 2020 in the NRDC analysis.) Present values in year 2013 were calculated using a discount rate of 5%; NRDC 2030 compliance costs were applied to years 2031-2033. NRDC new renewables generation was calculated as the change in wind, biomass, and "other renewables" generation from 2012 to 2020. NRDC CO2 emissions reductions were converted from short tons to metric tons. NRDC only provided non-cost results for the year 2020, thus limiting our ability to compare Market Impacts and Electricity Sector CO2 Emissions for any other time period.

Sources: NRDC (2012) Table 8.1, p. 25; Table 9.1, p. 29; Figure 13.3, p. 46; Figure 13.2, p. 43

Year(s) Unit NRDC Main CaseNERA Maximum Flexibility Case


COSTSPV of Electricity Service Costs 2018-2033 Billion 2012$ 40 109 97

PV of Non-Electricity Natural Gas Costs 2018-2033 Billion 2012$ Not Reported 8 54

PV of Consumer Costs 2018-2033 Billion 2012$ N/A 116 151MARKET IMPACTS

Coal Retirements Through 2020 GW 59 32 75Energy Efficiency Use 2020 TWh 482 174 19Coal-Fired Generation 2020 TWh (484) (270) (685)Natural Gas-Fired Generation 2020 TWh 18 78 601New Renewables Generation 2020 TWh 1 (2) (1)

ELECTRICITY SECTOR CO 2 EMISSIONSCoal 2020 MM metric tons Not Reported (263) (683)Natural Gas / Oil 2020 MM metric tons Not Reported 33 229Total U.S. 2020 MM metric tons (511) (230) (454)


Comparisons to Results Provided by NRDC (Changes from Current Levels)

Notes: NewERA model year 2023 was used for comparisons with NRDC year 2020. (In NewERA every 5th year is modeled and the limits in 2023 are most similar to those in 2020 in the NRDC analysis.) NRDC New Renewables Generation was calculated as the change in wind, biomass, and "other renewables" generation from 2012 to 2020. Current conditions imply 2013 for NERA’s analysis and 2012 for NRDC’s analysis. NERA’s coal retirement numbers do not include any retirements prior to mid-2013, while NRDC’s numbers would include such retirements.

Sources: NRDC (2012) Figure 13.2, p. 43; text, p. 45

Impact estimates presented up to this point have compared outcomes of the policy scenario to projected baseline outcomes in the same future year

– “Cumulative effects” include baseline changes over time as well as changes due to the policy

– Cumulative impact estimates are also useful because they can indicate when a policy may contribute to substantial disruptions of the energy system and economy

Relative to levels in the first year of the modeled projections (“current conditions”), both NRDC and NERA project large changes in coal capacity and energy efficiency by 2020 as a result of complying with the target CO2 rate proposed by NRDC

Comparison of NRDC and NERA Results (Relative to Current Conditions)

Year(s) Unit NRDC Main CaseNERA Maximum Flexibility Case


Coal Retirements Through 2020 GW 80 73 115Energy Efficiency Use 2020 TWh 482 437 282New Renewables Generation 2020 TWh 146 58 59


Comparisons to Results Provided by NRDC/Synapse (Job Impacts)

Notes: NewERA model years 2018 and 2023 were used for comparisons with NRDC years 2016 and 2020, respectively. (In NewERA every 5th year is modeled and the limits in 2018 and 2023 are most similar to those in 2016 and 2020 in the NRDC analysis.) Job equivalents equal total labor income change divided by average income per job. The table shows changes in net jobs, which includes increases in some sectors (e.g., energy efficiency) and decreases in others (e.g., coal). Sources: Synapse (2013) Table 1, p. 4

In a report prepared for NRDC, Synapse (2013) estimated the job impacts of changes in electricity and energy efficiency spending under NRDC’s target CO2 rate

Synapse’s (2013) methodology for estimating job impacts is inferior to NERA’s methodology in several important ways

– Synapse used IMPLAN, an input-output multiplier method that does not fully account for spending interactions in the economy (NERA used NewERA, a general equilibrium model of the economy that does account for these interactions)

– Synapse did not account for negative impacts on jobs of higher delivered electricity prices and natural gas prices (NERA’s job impacts do account for market impacts of delivered energy price changes)

– Synapse projects increases in jobs from spending on energy efficiency (NERA’s analysis accounts for all potential effects of energy efficiency on the economy, not just the positive effects of the expenditures)

Comparison of NRDC and NERA Job Impacts (Job-Equivalents Relative to Baseline)

Model Year NRDC Main CaseNERA Maximum Flexibility Case


2016 75,800 (131,000) (64,000)

2020 210,400 (75,000) (214,000)

About NewERA


NewERA Model

NewERA Model Structure Key NewERA energy outputs:

Electricity Sector • Capacity • Generation • Retirements • Wholesale and Delivered

Electricity Prices • Emissions

Other Energy Sectors • Production • Consumption • Energy Prices

Economic Outputs • GDP • Consumption • Employment


NewERA Electricity Sector Model: Overview

Bottom-up dispatch and capacity planning model

– Unit-level information on generating units in 34 U.S. regions

– Detailed coal supply curves by coal type

– Regional electricity demand and capacity requirements

Least-cost projection of market activity

– Satisfies demand and all other constraints over model time horizon

– Projects unit-level generation and investment decisions and regional fuel and electricity prices

Data sources

– Model calibrated to U.S. Energy Information Administration Annual Energy Outlook 2013

– Other electricity sector data from EIA, EPA, NERC, NREL, NETL, Ventyx Velocity Suite, and HellerWorx


NewERA Electricity Sector Model: Unit-Level Detail

Represents electricity capacity and generation at the unit level – 16 generating technologies, including renewables – Unit physical attributes: capacity, utilization, heat rate, outages,

retrofits, emission rate – Unit costs: capital, fixed O&M, variable O&M, transmission and

distribution, refurbishment

Projects unit generation and investment decisions to minimize sector costs over projection period – Available actions include retirements, new builds, retrofits, coal type

choice (for coal units), and fuel switching – Units will retire if they cannot remain profitable – Units can also be forced to take certain actions at specified times, or

given a choice to act or retire


NewERA Electricity Sector Model: Fuel Supply

Model represents supply of five fuels: coal, natural gas, oil, biomass, and uranium

Detailed supply curves for 23 coal types – At each “step” on supply curve, provides price, annual

production limit, and total coal reserves available at that price

– Transportation matrix determines coals that can be delivered to each unit and the cost of delivery

– Coal units assigned an initial coal type, but can incur a capital costs to switch to other coal types when reasonable


NewERA Electricity Sector Model: Electricity Demand

Demand by region for 34 U.S. regions

25 electricity demand “load blocks” – Ten in summer and five each in

winter, spring, and fall – Reflects peak vs. off-peak demand

in each season

Regional “reserve margins” based on peak demand – Regions required to have capacity

in excess of peak demand for system reliability


NewERA Electricity Sector Model: Model Solution

Model is required to meet many electricity market and regulatory constraints – Regional demand, reserve capacity requirements, fuel

availability, forced retrofits, RPS or emissions regulations

– Flexible to a variety of user-specified constraints, from unit-specific actions to market-wide regulations

Finds the least-cost way to satisfy all constraints – Uses perfect foresight of market conditions

– Chooses investments and operation of units to minimize present value of costs over the entire model period


NewERA Electricity Sector Model: Model Outputs

Model period 2013 – 2043 with outputs for every 5th year (flexible to user specification) – Results focused on period from 2013 - 2033

Unit-level and regional activity – Generation, investments in retrofits or

capacity, retirements, operational costs, and revenues from generating and capacity services

Regional prices – Minemouth and delivered coal, non-coal fuels,

wholesale electricity, capacity, renewable energy credits, and emissions credit where applicable

– Separate cost-of-service calculation reflects delivered prices in regulated jurisdictions

INPUTS • Unit-level characteristics • Detailed coal supply • Regional demand • Regulatory environment

NewERA Model

OUTPUTS • Load and dispatch • Other unit actions • Prices (fuel, electricity,

capacity, tradable permits)

Appendix: Annual Impacts


Annual Electricity Market Impacts: Baseline

Table shows the annual model values that are displayed in graphs in the main presentation.

Note that annual values are weighted by the appropriate number of years in calculating all 2018-2033 averages

– Consistent with the NewERA model, outputs for individual model years are applied to the following five years (e.g., 2018 values are used for years 2018-2022)

– When averaging, 2018, 2023, and 2028 are weighted for five years each and 2033 is weighted for a single year

Baseline

2018 2023 2028 20332018-2033

Avg2018-2033 Cum Total

Cumulative Coal Retirements (GW) 37 41 41 41Coal-Fired Generation (TWh) 1,619 1,749 1,824 1,908 1,742 27,871Electricity Sector Coal Use (TBtu) 14,291 15,365 15,910 16,473 15,269 244,304Electricity Sector Coal Use (MM Tons) 744 797 829 863 795 12,714Natural Gas-Fired Generation (TWh) 1,089 1,091 1,061 1,282 1,093 17,492Electricity Sector Natural Gas Use (TCF) 7.92 7.86 7.63 9.20 7.89 126.23Henry Hub Natural Gas Price (2012$/MMBtu) 3.46 4.09 4.51 5.05 $4.08Delivered Electricity Price (2012¢/kWh) 11.3 11.6 12.4 12.7 11.8Ele Coal CO2 Emissions (MMMT) 1,538 1,661 1,731 1,812 1,654 26,465Ele Natural Gas / Oil CO2 Emissions (MMMT) 429 426 412 497 427 6,830Ele CO2 Emissions (MMMT) 1,967 2,087 2,144 2,310 2,081 33,301


Annual Electricity Market Impacts: NRDC CO2 Standards

Tables show the annual model values that are displayed in graphs in the main presentation.

Totals may differ from sum of rows due to independent rounding.

Maximum Flexibility: NRDC CO2 Target Rate

2018 2023 2028 20332018-2033


Cumulative Coal Retirements (GW) 65 73 76 76Coal-Fired Generation (TWh) 1,541 1,479 1,345 1,394 1,451 23,219Electricity Sector Coal Use (TBtu) 13,482 12,607 11,036 11,230 12,303 196,854Electricity Sector Coal Use (MM Tons) 698 656 576 590 640 10,244Natural Gas-Fired Generation (TWh) 1,140 1,169 1,203 1,368 1,183 18,926Electricity Sector Natural Gas Use (TCF) 8.29 8.48 8.71 9.82 8.58 137.23Henry Hub Natural Gas Price (2012$/MMBtu) 3.51 4.16 4.66 5.15 $4.17Delivered Electricity Price (2012¢/kWh) 11.4 12.5 14.3 15.0 12.9Ele Coal CO2 Emissions (MMMT) 1,462 1,398 1,266 1,312 1,372 21,945Ele Natural Gas / Oil CO2 Emissions (MMMT) 449 459 472 531 464 7,428Ele CO2 Emissions (MMMT) 1,911 1,857 1,738 1,844 1,836 29,379

Limited Flexibility: NRDC CO2 Target Rate

2018 2023 2028 20332018-2033


Cumulative Coal Retirements (GW) 89 115 124 124Coal-Fired Generation (TWh) 1,302 1,065 653 827 995 15,922Electricity Sector Coal Use (TBtu) 10,848 8,169 3,841 5,314 7,475 119,607Electricity Sector Coal Use (MM Tons) 549 412 192 271 377 6,032Natural Gas-Fired Generation (TWh) 1,360 1,693 2,121 2,358 1,764 28,226Electricity Sector Natural Gas Use (TCF) 9.83 12.14 15.17 16.63 12.64 202.32Henry Hub Natural Gas Price (2012$/MMBtu) 3.72 4.68 5.55 6.02 $4.74Residential Electricity Price (2012¢/kWh) 11.4 12.0 13.1 13.2 12.2Ele Coal CO2 Emissions (MMMT) 1,212 979 588 752 915 14,643Ele Natural Gas / Oil CO2 Emissions (MMMT) 532 655 820 874 682 10,907Ele CO2 Emissions (MMMT) 1,745 1,634 1,407 1,628 1,597 25,557


Annual Electricity Market Impacts: Changes Relative to Baseline

Tables show the annual model values that are displayed in graphs in the main presentation.

Totals may differ from sum of rows due to independent rounding.

Maximum Flexibility: Change Relative to Baseline

2018 2023 2028 20332018-2033


Cumulative Coal Retirements (GW) 28 32 35 35Coal-Fired Generation (TWh) -78 -270 -479 -514 -291 -4,652Electricity Sector Coal Use (TBtu) -809 -2,759 -4,874 -5,242 -2,966 -47,451Electricity Sector Coal Use (MM Tons) -46 -141 -252 -273 -154 -2,469Natural Gas-Fired Generation (TWh) 50 78 141 85 90 1,434Electricity Sector Natural Gas Use (TCF) 0.37 0.61 1.09 0.62 0.69 10.99Henry Hub Natural Gas Price (2012$/MMBtu) $0.05 $0.07 $0.15 $0.09 $0.09Delivered Electricity Price (2012¢/kWh) 0.0 0.8 1.9 2.4 1.0Ele Coal CO2 Emissions (MMMT) -76 -263 -465 -500 -282 -4,520Ele Natural Gas / Oil CO2 Emissions (MMMT) 20 33 59 34 37 598Ele CO2 Emissions (MMMT) -56 -230 -405 -466 -245 -3,923

Limited Flexibility: Change Relative to Baseline

2018 2023 2028 20332018-2033


Cumulative Coal Retirements (GW) 53 75 83 83Coal-Fired Generation (TWh) -317 -685 -1,172 -1,081 -747 -11,949Electricity Sector Coal Use (TBtu) -3,442 -7,196 -12,069 -11,159 -7,794 -124,698Electricity Sector Coal Use (MM Tons) -196 -385 -637 -592 -418 -6,682Natural Gas-Fired Generation (TWh) 271 601 1,060 1,075 671 10,734Electricity Sector Natural Gas Use (TCF) 1.91 4.27 7.55 7.43 4.76 76.08Henry Hub Natural Gas Price (2012$/MMBtu) $0.26 $0.59 $1.04 $0.97 $0.65Residential Electricity Price (2012¢/kWh) 0.1 0.4 0.7 0.5 0.4Ele Coal CO2 Emissions (MMMT) -326 -683 -1,143 -1,060 -739 -11,822Ele Natural Gas / Oil CO2 Emissions (MMMT) 104 229 407 376 255 4,076Ele CO2 Emissions (MMMT) -223 -454 -736 -682 -484 -7,744


Average Delivered Electricity Prices by Ratepayer Class

U.S. Average Delivered Electricity Price (2012¢/kWh)

2018 2023 2028 2033Average

2018 -2033Baseline

Residential 13.7 14.2 15.2 15.2 14.4Commercial 11.8 12.2 13.2 13.3 12.5Industrial 7.7 7.6 7.9 8.7 7.8All Sectors 11.3 11.6 12.4 12.7 11.8

Maximum FlexibilityResidential 13.7 15.4 18.3 19.0 16.0Commercial 11.9 13.4 16.0 16.7 13.9Industrial 7.7 7.8 8.3 8.9 8.0All Sectors 11.4 12.5 14.3 15.0 12.9

Limited FlexibilityResidential 13.8 14.6 16.0 15.5 14.8Commercial 11.9 12.6 14.0 13.7 12.9Industrial 7.7 8.0 8.6 9.4 8.2All Sectors 11.4 12.0 13.1 13.2 12.2

Maximum Flexibility Change(relative to Baseline)


Limited Flexibility Change(relative to Baseline)



U.S. Total Electricity Bills by Ratepayer Class

U.S. Total Electricity Bills (billion 2012$)

2018 2023 2028 2033Average

2018 -2033Baseline

Residential $188.5 $200.6 $214.7 $229.2 $203.0Commercial $155.6 $166.0 $178.6 $191.5 $168.3Industrial $80.3 $84.2 $90.5 $100.7 $86.0All Sectors $424.3 $450.8 $483.7 $521.4 $457.3

Maximum FlexibilityResidential $187.6 $204.3 $228.3 $245.2 $209.1Commercial $155.0 $169.3 $188.3 $204.0 $173.0Industrial $80.0 $85.5 $96.2 $105.6 $88.4All Sectors $422.7 $459.1 $512.8 $554.8 $470.5

Limited FlexibilityResidential $187.8 $202.1 $222.1 $238.1 $206.1Commercial $155.4 $167.9 $185.7 $199.8 $171.6Industrial $79.7 $86.3 $97.7 $108.6 $89.2All Sectors $422.9 $456.3 $505.5 $546.5 $466.9

Maximum Flexibility Change(relative to Baseline)

Residential ($0.8) $3.6 $13.6 $16.0 $6.1Commercial ($0.6) $3.3 $9.7 $12.5 $4.7Industrial ($0.3) $1.3 $5.7 $4.9 $2.4All Sectors ($1.7) $8.3 $29.1 $33.4 $13.2

Limited Flexibility Change(relative to Baseline)

Residential ($0.7) $1.5 $7.4 $8.9 $3.1Commercial ($0.2) $1.9 $7.1 $8.3 $3.3Industrial ($0.5) $2.1 $7.2 $8.0 $3.3All Sectors ($1.4) $5.5 $21.8 $25.1 $9.6


References

Allcott, Hunt and Michael Greenstone, 2012. "Is There an Energy Efficiency Gap?," Journal of Economic Perspectives, American Economic Association, vol. 26(1), pages 3-28, Winter. Available at www.nber.org/papers/w17766.

Lashof, Daniel et al (“NRDC”), 2012. “Closing the Power Plant Carbon Pollution Loophole,” National Resources Defense Council. Available at http://www.nrdc.org/air/pollution-standards/files/pollution-standards-report.pdf.

Keith, Geoff et al (“Synapse”), 2011. “Toward a Sustainable Future for the U.S. Power Sector: Beyond Business as Usual 2011,” Synapse Energy Economics, Inc. Available at http://www.synapse-energy.com.

Stanton, Elizabeth et al (“Synapse”), 2013. “Economic Impacts of the NRDC Carbon Standard,” Synapse Energy Economics, Inc. Available at http://www.synapse-energy.com.

U.S. Environmental Protection Agency (“EPA”), 2011. Projected Impacts of State Energy Efficiency and Renewable Energy Policies, Annual Energy Savings and Generation Estimates. Available at http://www.epa.gov/statelocalclimate/state/statepolicies.html.

© Copyright 2013 National Economic Research Associates, Inc. All rights reserved.

This presentation reflects the research, opinions, and conclusions of its authors, and does not necessarily reflect those of NERA, ACCCE, or any other organization. The findings contained in this report may contain predictions based on current data and historical trends. Any such predictions are subject to inherent risks and uncertainties. NERA accepts no responsibility for actual results or future events.

NERA Project Team David Harrison, Ph.D. Anne Smith, Ph.D. Scott Bloomberg Paul Bernstein, Ph.D. Sebastian Mankowski Meredith McPhail Andrew Stuntz

Documents

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